Government completes draconian draft tax law
Rendi A. Witular, The Jakarta Post, Jakarta
The Directorate General of Taxation has completed the revision of the country's tax laws, which will include greater power for the tax office to detain major tax evaders without trial and impose stronger sanctions on a range of lesser violations.
According to a draft of the revised version of the General Tax Procedure Law No. 16/2000, a copy of which was made available to The Jakarta Post on Tuesday, a tax official assigned to investigate a tax crime will have special powers -- much like the police -- to capture and detain people suspected of committing tax crimes.
Moreover, the directorate will also have direct and full authority to investigate a tax crime without consulting the police, which is the way the current system works, but has been deemed inefficient.
Aside from finishing the revision on the tax procedure law, the directorate has also concluded the drafting of laws for value-added taxes, luxury taxes and income taxes. The drafts are expected to be submitted to the House of Representatives for deliberation in February.
The revision of the tax laws, which are part of the government's key economic reform measures after graduating from the International Monetary Fund bailout program, is aimed at boosting tax revenue and compliance.
Granting greater power to tax officials to detain people may become a controversial issue and will likely meet with protests from various groups.
I Made Gde Erata, head of the tax reform team at the tax directorate, who has also been involved in the revisions, told the Post that it was part of the government's reform drive and that the law could still be revised.
"The law is still subject to change," he said.
The tax directorate has previously said that it needed a stronger legal basis to be able to act decisively against uncooperative taxpayers amid growing concerns over the astronomical amount of tax arrears.
Currently, the tax officials are only permitted to detain people suspected of tax evasion as stipulated under Government Regulation No. 137/2000, which came into effect early in 2001. But with the revised law, the tax office can also detain people suspected of committing other forms of tax violations.
The tax office has detained two suspected violators, including one foreigner, since the government regulation became effective.
But the move has been strongly opposed by businessmen and economists, who said that such policies could further encourage extortion and collusion as it could be abused by the thousands of unscrupulous tax officials to fleece taxpayers.
Other controversial points under the draft of the general tax procedure law is the authority for the tax directorate to directly confiscate assets, bank accounts, account receivables and commercial papers belonging to those deemed to be uncooperative taxpayers, without the consent or involvement of the police or state bailiff.
Sanctions for tax violations will also become much stiffer. For example, a corporate taxpayer will be penalized a Rp 1 million (US$120) fine if it fails to submit its annual tax notice, known as a Surat Pemberitahuan Tahunan (SPT), on time. The penalty is higher than the Rp 100,000 fine currently imposed.
The tax directorate has refused demands from businessmen to include in the draft revision an article that covers a reimbursement for reckless or intentional disregard of guidelines by the tax officials, which are known to occur frequently.
Other key points in the draft law
* Taxpayers will be fined Rp 500,000 for failing to submit their value-added tax forms, known locally as PPN, and Rp 50,000 for other taxes.
* Corporate taxpayers will be fined Rp 1 million for not being on time with their annual tax statements and Rp 250,000 for individual taxpayers.
* Taxpayers will have to pay a monthly interest of 2 percent of their unpaid taxes.
* Corporate taxpayers that fail to comply with tax notices accurately or intentionally refuse to report activities subject to taxation, will be fined 10 percent of total reported taxes.
* Taxpayers will be sent to prison for a maximum of six years or a financial penalty of four times the amount of the unpaid taxes for failing to have a tax register number; intentionally falsifying tax reports; rejecting an audit; fake documents; or failing to keep accounting reports, notes and documents related to the payment of taxes.
* Taxpayers who received a tax restitution illegally face a maximum 6-year imprisonment or a fine four times the amount of the withdrawn restitution.
* Taxpayers who intentionally issue a false tax notice could also be imprisoned up to six years or fined Rp 500 million.
* The tax directorate has the authority to state the amount of tax if there is an indication that the taxpayer has not reported the tax properly based on reports from state and private institutions.